Little Product, Big Profits

It's not the size of the drug, it's the size of the fight in the drug -- or something like that. Abraxis Bioscience (NASDAQ:ABBI) was able to increase sales of its nanometer-sized drug, Abraxane, to $61.8 million for the first quarter, more than double sales figures for the same quarter last year.

Clearly the new co-promotion agreement with AstraZeneca (NYSE:AZN) has helped get the word out to doctors that Abraxane fights breast cancer better than its big brother, Bristol-Myers Squibb's (NYSE:BMY) Taxol. Going into its third year on the market, Abraxane has increased its market share to 20%.

In order to increase the sales of Abraxane further, Abraxis is trying to expand the labeling indications to include more potential patients. This year it has plans to begin three different phase 3 clinical trials for metastatic breast cancer, non-small-cell lung cancer, and melanoma. Abraxane is currently approved for treatment of breast cancer, but only after failure of a front-line drug. If successful, the breast cancer trial will allow Abraxis to market the drug to doctors as a first choice rather than a last resort.

Elan (NYSE:ELN) slapped Abraxis with a nano-particle patent infringement lawsuit last year. The trial is set to begin in June 2008, so the fear of having to pay royalties may drag the stock down for anther year or more. If Abraxis can settle or win the lawsuit, it should be smooth sailing for the platform technology that Abraxane is built on. Nab-rapamycin, another drug in its pipeline using this platform technology, is set to enter clinical trials this year.

In its earnings release last week, Abraxis reported that sales for its hospital-based products rose 24 percent to $140.3 million. Excluding expenses related to acquiring products from AstraZeneca last year, the company earned $0.13 per share. Analysts were expecting $0.21 per share -- apparently double-digit sales growth isn't good enough for them -- so the stock dipped after the earnings release.

Abraxis seems set to increase sales further in the future, although the near term may see an increase in R&D expenses and thus a dip in earnings. With a trailing-12-month adjusted earnings P/E of 33, Abraxis certainly isn't a steal, but growth stocks hardly ever are.

A tiny bit more Foolishness:

• Beware the Nano Lawyers
• Dueling Fools: Elan
• Altair: Recharged or Unplugged?

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any companies mentioned in this article. He blogs about start-up biotech companies at BabyBiotechs.com. The Fool has an ironclad disclosure policy.